Importance of Financial Disclosure

Importance of Financial Disclosure

Financial Disclosure

In family law proceedings, timely and accurate financial disclosure is important to achieve a fair, cost-effective, and lasting result. Without accurate financial disclosure by both parties, resolution is delayed and cost of litigation is needlessly increased.

Accurate disclosure is significant. Under the Family Law Act, if a couple reach an agreement that is later discovered to have been entered under inaccurate disclosure, that agreement can be set aside.

The article provides a brief overview of financial disclosure, why it is important, and the potential costs of inadequate disclosure to you, the family law litigant.

Rule 13 of the Family Law Rules

In Ontario, the Family Law Rules (Rules) were designed to ensure that parties provide prompt and comprehensive disclosure well in advance of a proceeding. The Rules were designed so that such disclosure was updated regularly. On May 2, 2015, amendments were made to the Rules to provide for additional requirements for financial disclosure.

Rule 13 guides parties in determining what information must be given in claims for property and support. At a minimum, expect in a family law proceeding to do the following: to complete a Form 13/13.1, to provide your most recent pay stub, to provide your three most recent Notice of Assessments, and to provide your three most recent Income Tax Returns.

Although not required under the Rules, expect that you may be asked to back-up your financial statements with bank statements, credit card statements, proofs of ownership, and appraisals. If you are a business owner or a high net worth individual, consider retaining an accountant to determine the values of shares, securities, debentures and other debts and assets. You may be asked to produce such reports throughout the process of litigation.

Duties Regarding Financial Disclosure

It cannot be stressed enough that full and open financial disclosure is explicitly required under the Family Law Rules. If you believe that your former partner’s financial statement is incomplete or does not contain sufficient information, you can ask that party to provide the additional information if it is necessary. If they do not provide such information within seven (7) days, you can bring a motion compelling them to produce such information and be awarded costs.

In addition to full, frank, and fair financial disclosure, the Rules mandate that each party update their financial statement before any case conference, motion, settlement conference, or trial, if that information is more than 30 days old. The Rules require you to update or correct any incorrect, incomplete, or out of date info.

To put it simply, courts expect parties to complete financial statements, to provide supporting materials and to update such disclosure regularly. It is surprising how often this message is lost on payor parents, and how much damage litigants can do to their own case by avoiding necessary disclosure.

Failure to Comply

If a court concludes that your financial disclosure is insufficient, out of date, or possibly false, a court can impute you with income that it deems appropriate in the circumstances. “Impute” means the court can simply chose how much your income should be for a given year. This is a scary prospect because the court can chose for you an income that may be higher than your actual income. The court’s ability to impute you with income is only limited by the fact that its determination must be based on some evidence (Korwin v Potworowski, [2007] O.J. No 4117 (Ont. C.A.)). Some litigants disregard this at their own peril.

It is especially important to be full, frank, and fair with your financial disclosure because if you proceed otherwise, in addition to imputing you with income, the court is entitled to draw an adverse inference against you (Daulby v Daulby, [2007] O.J. No 4737 (Ont. S.C.J.). This means that your financial disclosure was necessary to prove your side of the case and the fact that you failed to provided it shows that you have something to hide.

Parties should be aware that once a court has imputed you with income, its decisions can be difficult to overturn since the omitting party’s credibility has now been tarnished in the eyes of the court.

It is also important to know that as of January 1, 2014, additional changes have been made to the Rules to clarify provisions relating to the court’s power to enforce the Rules or court orders. Currently, there is a non-exhaustive list of orders courts can make for failure to comply with rule 13 or a court order, including dismissing your pleadings.

Conclusion

It may be difficult for parties to establish what assets must be included, how to determine income, and what disclosure entails. For example, if you are self-employed or you are a beneficiary in trust, how can income be determined? Dealing with such questions can lead to unintentionally inaccurate or insufficient financial disclosure. Incomplete financial information will prolong and complicate your family law matter. It is best to avoid such unnecessary headaches and provide as precise and complete financial information as early as possible. The most efficient way to ensure at the outset that your financial disclosure is accurate and comprehensive is to speak to a family lawyer.

Call David H. Nuri, Barrister & Solicitor at 416-323-5092 for a Family Lawyer that can help you in your dispute. We are happy to speak to you.

The information contained herein is not intended to provide legal advice.